Jetstar and Virgin pay penalties for ‘drip pricing’

The Federal Court has ordered Jetstar Airways to pay a $545,000 penalty and Virgin Australia Airlines to pay a $200,000 penalty for breaches of the Australian Consumer Law.

In November 2015, Jetstar was found to have made false or misleading representations about specific advertised airfares on its website in 2013 and its mobile site in 2014. Virgin was found to have made false or misleading representations about specific advertised airfares on its mobile site in 2014.

In imposing the penalty against Jetstar, Justice Foster commented upon the importance of the concept of general deterrence in the imposition of penalties, and noted that the penalty imposed is designed to discourage similar behaviour by others.

“The ACCC was concerned that Jetstar and Virgin’s ‘drip pricing’ conduct drew consumers into an online purchase process with a headline price, but failed to provide adequate disclosure of additional fees and charges that are likely to apply,” ACCC Chairman Rod Sims said.

“As a result of the ACCC’s enforcement and compliance actions, businesses across several industries, including ticketing and accommodation, have now improved their online booking practices to provide adequate disclosure of additional fees and charges that are likely to apply.”

“The ACCC is turning its attention to consumer guarantees issues in the airline industry as part of its compliance and enforcement priorities for 2017,” Mr Sims said.

The penalty imposed on Virgin was ordered following joint submissions to the Court by Virgin and the ACCC.

‘Drip pricing’ is where a headline price is advertised at the beginning of an online purchasing process and additional fees and charges (which may be unavoidable for consumers) are then incrementally disclosed (or ‘dripped’). This can result in consumers paying a higher price than the advertised price or spending more than they realise.